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Claiming Back US Tax from the UK.

janner66

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Hi,

I am a UK citizen and we own a timeshare in Las Vegas.

For the last two years I have rented the timeshare out through my resort who take 38% commission and also say: "In order to place your unit up for rent you have to be a US citizen with a US Social Security number for tax purposes. If you don’t have a US social security number a charge of 30% nonresident tax will ensue. You may apply with the Internal Revenue Service of the United States to receive a portion of this rental returned. Their website is www.irs.gov. If you do not want to obtainan ITIN number you may submit the Rental Agreement, but an additional 30% will be taken per the IRS."

I have had a look on the IRS webpage but cannot find out how to claim back this tax.

Has anyone had similar experiences who could help me find the right form and instructions on what to do please?
 

janner66

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I have also received a form 1042-S Foreign Person's US Source Income Subject to withholding 2016 but I don't know what to do with it. Looks like Section A has been sent to the IRS and I have copies of B,C and D. Am I meant to do something with this form please?
 

mtwingcpa

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This isn't a tax area that I am especially familiar with, but I believe you would need to file Form 1040NR (NR stands for "nonresident"). Whether you will receive a refund will depend on the facts of your particular situation.

All of that is pretty complicated, but the IRS is perfectly happy if you do nothing and just let them keep the 30% withholding amount. Naturally, if you plan to continue renting in future years, it might be worth the trouble to learn how to handle this.
 

Conan

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janner66

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Thanks very much for your replies mtwingcpa and Conan. I will look at the form and try to work out what to do through the IRS website. If I ever crack it I will let you know my findings as to help others. :)
 

janner66

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Will my partner need an ITIN also as she is a joint owner and is named on the ownership deed, however it appears that she is not named on the 1042-s form that the resort have sent to the IRS. The 1042-s form also has our old address (which I have since updated with the mortgage company and resort) but do you think this might cause a problem?

Also, do I have to apply for an ITIN every year and therefore next year I renew my existing one?

Many Thanks for your help :)
 

Conan

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I don't see any advantage to your partner joining in the tax filing.
As to addresses, judging from the IRS website link above, you should use your current address on the 1040NR. I wouldn't expect a different address on the 1042-s to cause a problem and hopefully it won't.
Once you have an ITIN you can use it in future years, so you'll neither reapply nor renew it.
 

janner66

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Sorry, another question. Is my income exempt from tax by treaty? I don't really understand the question. It looks like I can fill in a simplified procedure:

Simplified Procedure for Claiming Certain Refunds

You can use this procedure only if you meet all of the following conditions for the tax year.

  • You were a nonresident alien.

  • You were not engaged in a trade or business in the United States at any time.

  • You had no income that was effectively connected with the conduct of a U.S. trade or business.

  • Your U.S. income tax liability was fully satisfied through withholding of tax at source.

  • You are filing Form 1040NR solely to claim a refund of U.S. tax withheld at source under chapter 3 or tax withheld under chapter 4 (FATCA).
I should qualify under the first and last bullet points. :)
 

dioxide45

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Sorry, another question. Is my income exempt from tax by treaty? I don't really understand the question. It looks like I can fill in a simplified procedure:

Simplified Procedure for Claiming Certain Refunds

You can use this procedure only if you meet all of the following conditions for the tax year.

  • You were a nonresident alien.

  • You were not engaged in a trade or business in the United States at any time.

  • You had no income that was effectively connected with the conduct of a U.S. trade or business.

  • Your U.S. income tax liability was fully satisfied through withholding of tax at source.

  • You are filing Form 1040NR solely to claim a refund of U.S. tax withheld at source under chapter 3 or tax withheld under chapter 4 (FATCA).
I should qualify under the first and last bullet points. :)
Don't you have to meet all conditions?
 

janner66

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Lol sorry I do actually meet all requirements, for some reason I just highlighted those two!
 

janner66

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More questions about treaties! I've read publication 901 and still don't understand. I don't think I need to fill in Item L at all as I qualify under chapter 4? I have filled in all other questions.

Page 5—Schedule OI.
You must answer all questions. For item L, identify the country, tax treaty article(s) under which you are applying for a refund of tax, the number of months in prior years that you claimed the treaty benefit, and the amount of exempt income in the current year. Also attach Form 8833 if required.
Note.

If you are claiming a reduced rate of, or exemption from, tax based on a tax treaty, you generally must be a resident for income tax purposes of the particular treaty country within the meaning of the treaty and you cannot have a permanent establishment or fixed base in the United States. See Pub. 901 for more information on tax treaties.

If you are claiming an exemption from tax under chapter 4, you must qualify for a reduced rate of, or exemption from, tax for chapter 3 purposes unless the payment is not an amount subject to chapter 3 withholding. See Regulations section 1.1441-2(a).
 

Conan

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Here's the US-UK treaty. The only provision I see that might apply is if you're paying UK income tax on this rent, then it's US exempt.
If that's not the case then no, it's not exempt under treaty.
https://www.treasury.gov/resource-center/tax-policy/treaties/Documents/uktreaty.pdf

Here's Publication 519.
https://www.irs.gov/pub/irs-pdf/p519.pdf
Absent a treaty provision, your rent is US-source, (Page 12), and if it's not effectively connected to a US trade or business of yours then a 30% tax properly applies to all of it (page 20).

But (per page 21 of Publication 519) if you have income from real property located in the United States that you own or have an interest in and hold for the production of income, you can choose to treat all income from that property as income effectively connected with a trade or business in the United States. If you make this choice, you can offset the income by certain expenses. Any remaining net income is taxed at graduated rates. You'll report the rental income and expenses on Schedule E (Form 1040) and attach the schedule to Form 1040NR.

Having made this choice, you'll follow Publication 527 https://www.irs.gov/pub/irs-pdf/p527.pdf (which page 21 above refers to) in reporting this income.
https://www.irs.gov/pub/irs-pdf/p527.pdf#en_US_2016_publink1000219106

This will give you a way to subtract the maintenance you paid from the rent you received, and maybe take some depreciation too. It would be great if you can show net income of zero and a full refund of what was withheld, since that will spare you the tricky business of figuring out the graduated rate of tax on this income.

This is probably as far as I can go in explaining how to fill out the forms.
 
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janner66

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OMG WOW you are a legend Conan.

Tax is soooooooo complicated lol. You must have a special brain.

I pay no UK income tax on this rent so the treaty is out.

I'll give it a go. Thanks ever so much for your help. I really do appreciate it :)
 

Quinte

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We just got our ITIN numbers - took about six months. As join owners we both needed one as the tax refund will be split between us.
 

janner66

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Me and my partner both own the timeshare but I am hoping an ITIN number in just my name is enough as there may be complications with her name. Any refund will go straight into the joint account anyway. I didn't realise it would take that long though. Thanks for the info :)

Have you successfully claimed back a tax refund yet or are you in the process of doing so?
 
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